Compare the effects on the importing country of an export
Subsidy and an export tariff imposed by a large country.
A)The importing country will gain from both an export subsidy and an export tariff imposed by a large country.
B)The importing country will lose from both an export subsidy and an export tariff imposed by a large country.
C)The importing country will gain from an export tariff and lose from an export subsidy imposed by a large
Country.
D)The importing country will gain from an export subsidy and lose from an export tariff imposed by a large country.

Question

Quizplus · Accepted Answer

An export subsidy is a payment made by the exporting country to its domestic producers to encourage exports. This means that the domestic producers can sell their goods at a lower price in the importing country. Therefore, the importing country gains from the lower prices and increased consumption of the subsidized product. 
On the other hand, an export tariff is a tax imposed by the exporting country on the export of a specific good. This means that the price of the good in the importing country increases, making it less competitive compared to domestic producers. Therefore, the importing country loses from the higher prices and reduced consumption of the tariffed product. Hence, the best option is D, as the importing country gains from an export subsidy and loses from an export tariff imposed by a large country.

Compare the Effects on the Importing Country of an Export